For the last five decades, the government and industry in India have campaigned against intellectual property rights, viz. patents and copyright, which were believed to be a form of exploitation of the developing countries by the multinationals of the United States and Europe.
This campaign was particularly vehement against multinationals in the pharmaceutical industry. India decided to recognise only product patents so that Indian companies could virtually copy products patented by the western pharma companies by merely changing the process of manufacturing. This has facilitated the growth and success of several Indian pharmaceutical companies.
One can debate the ethics and legalities of the issue, but one cannot deny the fact that the outcome has been beneficial to the people of India as drugs are much cheaper in India. So there is a general acceptance and even appreciation of what has been achieved.
However, over the last few years, Indian companies in different fields have taken up longer-term research work, and have begun to come up with their own patentable products and processes. This is particularly true in the pharma, IT and electronics industries. It has been made possible by a combination of factors favourable to Indian industry.
First of all, a large number of Indians have taken up science and technology as a career and have acquired research experience, mainly in US universities. Several of them now prefer to return to India because opportunities as well as rewards for genuine industrial R&D personnel have improved considerably.
Secondly, Indian companies can now afford to invest in longer-term research. Thirdly, the biggest and most profitable markets for their sophisticated products are in the US and Europe, which Indian companies can enter only if they can conform to international patent regimes.
As Indian companies invest in R&D, it has also become necessary for them to guard against pilferage of their intellectual property. One of the most vulnerable points in such R&D effort is the R&D technologists themselves.
A recent example of what happened in a highly innovative company in Bangalore is illustrative. The company's R&D head had designed a unique product over a period of several years. It was then manufactured and successfully marketed by the company. One of the trusted R&D technologists managed to pilfer the designs, prototypes, list of suppliers of components, etc. and then promptly left the company.
He then set up a company with a name very similar to that of his previous employer. That company started selling copycat products. The matter was reported to the police, who raided the premises of the new company and seized crucial evidence like design documents, drawings, software, test procedures and formats, addresses of vendors of parts, prices of suppliers, distributors' names, etc. which had been stolen.
How does a company protect its IPR against such unethical employees? Technologists in a well-motivated R&D department need to be trusted so that they feel motivated. They will be demotivated by what would appear to be policing of their activities. So any corrective measures need to be balanced against possible demotivation. Two steps could be taken:
(i) Whenever possible, split the sensitive R&D tasks in such a way that no particular individual has access to the complete design;
(ii) Make the employment contracts for R&D employees more stringent by including in it substantial penalties in the case of violation of IPR during employment and for a period of five years after employment terminates. Such penalties may also be made a liability of any other company which may employ him so that it is a deterrent.
However, these steps may prove to be like shutting the stable door after the horse has bolted. So we have to seek some other steps that can discourage key employees from defecting.
An obvious one is to enhance the loyalty and status of R&D employees. Usually in a company sales and marketing, finance, and even manufacturing get more prominence than R&D staff.
This has to be corrected by giving R&D personnel more prominence in interactions within the company and with the outside world. They may have to be given designations equivalent to those given in other functions (vice-president, general manager, etc).
The output of R&D personnel cannot be measured like that of a sales person or a factory employee. They have an international market. Therefore, their remuneration has to be fixed in relation to those of scientists in more developed countries.
But perhaps the most important motivating factor for any manager, including scientists, is the scope for moving up the corporate ladder. All of them may not be suitable for jobs in other areas of management. But from my experience, I can assert that scientists can become excellent general managers.
My successor as chairman of Hindustan Lever was a scientist in our R&D lab till we moved him into a general management job. The common perception that scientists live in the ivory tower and cannot cope with the operational jobs or profit responsibility is no more valid.
Because of their intellectual achievements, some of them can prove to be better at innovative thinking than others. In short the pool of scientists in a company should be kept vibrant through outflows as well as inflows from the pool.
The other reason for doing this is that like in all creative occupations, after a certain age, the innovative skills tend to decline. It is better for both the company and the individual to move scientists (barring some exceptional people) out of the purely creative function before this phase sets in.
Of course every scientist may not be able to make a success of such a transition. In such cases, it may be advisable to depute them to the academia with support from the company.
The other step a company should take is to invest in continuous innovation. At every stage, it has to think of the next generation of products and be prepared to invest more.
In that sense, R&D can be a very demanding and costly venture. Once you get on that treadmill it is not easy to dismount.
That is why successful companies commit a certain percentage of their turnover to R&D and it is constantly challenged on identifying worthwhile projects to invest in. Without such a process R&D effort in a company can peak and then decline.
Another major step in locking in the advantages of an innovative product before someone copies it is to invest in building a strong brand. This will create a strong base of customer loyalty and the company's brand will begin to be identified with innovation.
Copycat products will find it extremely difficult to penetrate such a barrier. This combination of an innovative product and imaginative marketing will be very difficult to beat. Incidentally that is what the company in Bangalore (from which the employee pilfered designs) has done successfully.
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